Orange County Business Journal

Ingram Misses Profit Estimates, Shares Sink

Chris Casacchia Thursday, April 28, 2011

Shares of Santa Ana-based Ingram Micro Inc. fell sharply in afterhours trading Thursday after the company reported a first-quarter profit that missed Wall Street’s expectations.

Ingram Micro, the biggest distributor of computers, software and other technology products, posted a profit of $56.3 million, down 20% from a year earlier.

Analysts were forecasting a profit of $76 million.

Investors seized on the profit miss and the news of continued disruptions in the company’s Australian operations, sending shares down nearly 6% in extended trading on a market value of $3.3 billion.

Revenue fell in line with Wall Street expectations at $8.7 billion, a first-quarter record for the company and an 8% jump from a year earlier.

Sales increased in every region: North America, Europe, the Middle East and Africa, Latin America and Asia.

Ingram Micro Chief Executive Gregory Spierkel said the profit decline was caused by difficulties transitioning to a new electronic logistics and productivity system in Australia.

“We’re diligently addressing these issues to drive improved profitability and performance as soon as possible,” he said. “We are confident the future benefits of the new system outweigh some of the hurdles we are facing today.”

Global demand and foreign currency exchange rates helped boost revenue, the company said.

Ingram runs on the slimmest of profits. It nets pennies on the dollars.

In recent years, the company has focused on providing its reseller customers more services that get better profit margins, including help with financing and logistics.

The company's gross margin was 5.21% in the first quarter, down from 5.45% a year earlier. The decline was attributed to the operational disruptions in Australia, price cuts in some Asian markets, less demand in Europe and squeezed profits in China and India.

The first-quarter performance was mixed, according to William Humes, Ingram Micro’s senior executive vice president and chief financial officer.

Revenue growth outpaced information technology spending and the return on invested capital exceeded company expectations. But “the system transition issues in Australia, however, dampened what otherwise would have been solid income performance,” he said.

The Australian system is scheduled to be completed in three years and will improve automation, operations and services for customers and partners around the world, Spierkel said.

In typical Ingram style, Spierkel provided comments about the current quarter but no financial guidance.

Sales are projected to grow on a year-over-year basis and progress on the Australian system will continue, but “will likely have an impact on the quarter.”

In the current quarter, gross margins may be taxed in Asian markets and less retail demand in Europe, Spierkel said.

Analysts are forecasting profits of $75 million on sales of $8.6 billion.